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Enterprise Resource Planning (ERP)

January 13, 2014

Harpreet Bhatia

Harpeeet is an experienced IT consultant with strong strategic, analytic, architectural and leadership skills. His has broad experience in IT management, architecture and has lead teams in various projects. He specializes in IT architecture, Program governance, IT roadmaps and strategy.

He is positive, results-driven and innovative individual with proven success in balancing operational synergies and business growth with client satisfaction, offering over 13 years’ experience in management and architecture positions in world-class organisations within the IT industry.

He is presently working as Program Architect for Department of Attorney General & Justice. He has been involved in architecture road map for the overall design and is working to establish synergy between various programs to be hosted in cloud environment.

Harpreet has passion for IT Strategy and Architecture, Adventure Sports and Travelling. He can be contacted on harpreet.bhatia@outlook.com

Enterprise Resource Planning (ERP)

Introduction

We are often asked ‘what is ERP’ – it stands for Enterprise Resource Planning (ERP). ERP is business management software which enables a business to use integrated software applications.

The term was first introduced in the mid-1990s by Gartner as a replacement for “Manufacturing Resource Planning” or MRP, the former name for the software application suite that manufacturers use to manage information from throughout the company and its operations.

So what is ERP

An ERP system’s purpose is to facilitate the flow of information between all business functions inside an organization and manage the connections to outside stakeholders. Built on a centralized database, ERP systems consolidate all business operations into a uniform and organization-wide system environment.

The integration allows all areas of the business to work together, so manufacturing, distribution, purchasing, sales, marketing, HR, operations and accounts can all link together easily. Enterprise Resource Planning software can be run on various types of hardware or networks. The objective is to ease the flow of data between the various parts of the business, and to enable the business to work at higher levels of efficiency.

A well designed ERP solution has the ability to process information from every part of the organization, and any type of transaction, within a single, integrated-solution which can track–in real-time–business operations and provide timely, accurate information to business managers. With a modern ERP system each person within the company has the information they need to do their job and it is available now – or as the technology folks like to say it “in real-time”.

What are the various modules of ERP solution

The question ‘what is ERP’ also requires an explanation of ERP modules. ERP software is a network of various modules, designed to perform a specific step of a production process. The modules can usually be purchased individually or as part of an integrated package. Each module is a specific business process such as Production, Purchasing, Inventory, Planning, Distribution, Tracking, Accounting, Sales/Marketing and Human Resources.

ERP software is made to suit a variety of industries, and therefore some modules may not be necessary for certain businesses. The following is a review of the primary functional areas of ERP software, but is by no means a comprehensive list. The primary functions include:

Accounting and Finance

• General Ledger
• Accounts Payable
• Accounts Receivable
• General Journals
• Trial Balance and Financial Reporting
• Bank Reconciliation
• Cash Management and Forecasting
• Budgeting

Distribution / Supply Chain Management

• Purchasing, Tracking & Sales Shipments of Inventory Items
• Track by Lot and/or Serial numbers
• Track quality tests
• Warehouse management functions
• Supply chain planning
• Supplier scheduling
• Order to cash
• Purchasing
• Inventory
• Claim processing

Manufacturing

• Track the conversion of raw materials into finished goods
• Track Labour, Overhead and Other manufacturing costs
• Provide the total cost of production

Modern ERP systems are able to track and provide first-in-first-out (FIFO) and Average Costing in production allowing firms to move away from the inefficient and inaccurate ‘Standard Cost’ method of production costs.

Service Management

• Track and monitor post sales service to products in the field
• Warranties
• Service Contracts
• Product Lifetime Costing has become standard functionality in current ERP solutions.

What are the benefits of ERP

There are plenty of ERP Benefits, which is the reason why companies choose Enterprise Resource Planning software. The benefits are varied, however enhanced efficiencies and productivity, along with greater competitiveness are the main ones cited by various organizations.

Integration & Efficiency

• ERP benefits a business by enabling integration and optimization of various business processes. It should eliminate costly integration processes and the need to purchase third-party software.
• A robust Resource Planning system can help organisations improve operational efficiencies and productivity within their business.
• The software is also a great tool to help proactively plan your sales process and avoid lost opportunities.
• An ERP system should access real time information, giving greater visibility across your business.
• ERP system can support corporate objectives by aligning workforce and organisational objectives.

Supply Chain Management

• ERP allows you to make informed decisions about stock levels and storage through easy access to relevant data to your data store.
• Provides you with a high level of visibility regarding product trends, helping to establish and predict the needs of your customer base.
• An ERP solution will provide detailed reports in real-time, so you can analyse customer trends, stock levels and purchasing requirements.

Service Management

• Accurate service management is easy, as your ERP system will capture critical data. Therefore vital operational data such as service dates, warranties, maintenance agreements, solutions and hours can be managed accordingly and analysed as required.
• The ERP software will provide real time data to enable planning and forecasting.
• Customer communications regarding servicing can be proactively managed.
• Provides analytical capabilities via Business Intelligence tool to better manage your supply chain logistics.

Customer Relationship Management (CRM)

ERP driven CRM solutions can provide your sales team with access to every aspect of a customer’s account, including data on contacts, sales, pricing, customer queries or new customer enquiring.
Provide customers multiple report options available to identify customer patterns, sale team efficiencies, product trends, pricing and margins, etc

Financial Management

• An ERP system can provide greater visibility across your business, with management and financial accounting, combined with business analytics.
• Improve financial management with smart financial controls and risk management tools
• ERP benefits a business by helping to increase profitability across the business, especially with efficient management of cash flow.

Cost Reduction

• Enterprise Resource Planning should improve standardisation across the business.
• ERP solutions create personnel efficiencies and drive flexibility in the workplace.
• Extend improvements and efficiencies out to your customer base.

Better ROI than other software systems

• ERP systems generally have lower implementation and maintenance costs than compatible systems.
• ERP software packages can be flexible, providing low cost software options for small business.
• A good ERP supplier will provide a bespoke implementation programme, designed to improve each customer’s competitiveness in their market, and improve various business efficiencies.

Successful ERP implementation strategies

Stories of disastrous ERP projects are enough to ensure sleepless nights for CEOs or CIOs looking at the prospect of implementing a new ERP system. So what should you do to ensure that your project is a success?

• Select the right software

It may seem obvious but it doesn’t always happen. ERP software vendors are typically bullish when it comes to the capabilities of the software they’re selling. You need to put them through a rigorous and structured selection process to find out which system suits your business best.

• Select the right implementation partner

Just as important as selecting the right software is selecting the right implementation partner. This is the company you’re relying on for their expertise and experience in implementing and getting the best out of the software that you’ve bought. Who can afford a team of consultants who don’t know what they’re doing or are only learning about the system at your expense?

• Plan the project carefully

Make sure your timelines are realistic and that you’re clear on what’s going to be done and who’s going to do it. Basic stuff, but it’s always well worth putting the effort into planning before the project starts.

• Be clear on the project scope and stick to it

“Scope creep” is a major risk in most projects. It’s potentially a killer as it eats into resources (both people and money), can have a complicating effect on other elements of the project, and can even delay the project.

• Focus on the expected benefits

How do we define a “successful implementation”? The real success of the project lies in achieving the expected business benefits. Business benefits realisation should be integral to every part of the project.

• Implementation team

Underestimating what’s required from the internal project team is a common problem. Their skills, experience and effort are crucial to a successful project. Free up your best people for the project and accept that their ability to do their usual jobs is going to be very limited or nil for the duration of the project. This can be costly and may involve backfilling to release people. The people you need on your project team are probably those you can least afford to lose, but remember that the time your team will spend working on the project will be a multiple of the time required from the ERP vendor and will shape the operation of your business for years to come.

• Ensure adequate end user training

After putting huge effort into designing and configuring the system it’s easy to think all the hard work has been done. But the system doesn’t run by itself: the users need to be trained on how to use the system properly. You may even have users who’ve never used an ERP system before.

• Manage change effectively

One absolute certainty is the introduction of the new system means things will change. Business processes and procedures will change. Job/role definitions will have to be updated (some roles may cease to exist). Users may be fearful of what the changes mean for them. If you proactively manage change you’ve a much better chance of a trouble-free cutover.

Leading ERP providers

There are various organisations that provide ERP software to streamline organisational business. However leading ERP software are provided by the follow organisations:

Oracle

• JD Edwards
• People Soft
• Fusion
• E-Business suite

SAP

• All-in-One

Microsoft

• Dynamics

Conclusion

From the beginning, a successful ERP implementation must be mapped to the client’s growth strategy. Taking this approach, along with superior project management, documentation, communication and training will ensure the success of the implementation and maximize adoption of the software. The technology should align with organizational processes and structures so that it supports the company goals, not the other way around. An ERP solution will become an integral part of your business planning, growth and strategy so select the tool that best suits your business.